WASHINGTON — Lawmakers are softening their stance on denying bonuses to employees of bailed-out financial institutions after President Barack Obama warned them against alienating the industry.
Less than a week after pushing through legislation to impose a 90 percent tax on the bonuses, the House Financial Services Committee prepared a considerably milder proposal that would let Treasury Secretary Timothy Geithner and financial regulators decide if employee compensation was "unreasonable" or "excessive."
The panel was expected to endorse the measure today, paving the way for a floor vote as early as next week.
The proposal, sponsored by Democratic Reps. Alan Grayson of Florida and James Himes of Connecticut, would not force employees of insurance giant AIG to give back money already paid to them. But it would empower the government to stop future payouts by financial institutions even if employees have been promised the money.
The bill would exempt firms willing to participate in a government program aimed at buying up $1 trillion of bad debt, or "toxic assets," sitting on the books of major banks.
Republicans opposed the bill, saying it was too vague.
"Private investors need certainty that Washington will not change the rules of the game while the game is being played," said Rep. Spencer Bachus of Alabama, the committee's top Republican.